32.608-1
Interest charges
Interest charges apply to unpaid contract debts after 30 days from demand unless the contract is excluded or exempted.
Overview
FAR 32.608-1 establishes the requirement for charging interest on contract debts that remain unpaid 30 days after a demand for payment is issued. Unless the contract falls under specific exclusions (as outlined in FAR 32.611) or is exempted by agency procedures, interest charges must be applied. The only exception to this rule is if the contract includes different terms in the clause at 52.232-17, Interest. This provision ensures that contractors are incentivized to resolve debts promptly and that the government is compensated for delayed payments.
Key Rules
- Interest Charges on Unpaid Debts
- Interest must be charged on any contract debt unpaid 30 days after a demand for payment, unless otherwise specified in the contract clause at 52.232-17.
- Exclusions and Exemptions
- Contracts excluded under FAR 32.611 or those exempted by agency procedures are not subject to these interest charges.
Responsibilities
- Contracting Officers: Must apply interest charges to unpaid contract debts after 30 days unless an exclusion or exemption applies, and ensure proper notification and documentation.
- Contractors: Must pay contract debts within 30 days of a demand to avoid interest charges, unless their contract is specifically excluded or exempted.
- Agencies: May establish procedures for exempting certain contracts or debts from interest charges and must ensure compliance with FAR requirements.
Practical Implications
- This rule exists to encourage timely payment of contract debts and to compensate the government for late payments.
- Contractors should be aware of the 30-day window to avoid additional costs.
- Common pitfalls include misunderstanding which contracts are excluded or failing to recognize when interest charges begin to accrue.